IDEAS home Printed from https://ideas.repec.org/p/zbw/glodps/299.html
   My bibliography  Save this paper

The unprotecting effects of employment protection: the impact of the 2001 labor reform in Peru

Author

Listed:
  • Jaramillo, Miguel

Abstract

According to the National Household Survey (ENAHO), approximately three out of four employment relationships within the formal sector of the Peruvian economy are based on temporary contracts. This percentage is larger than that of any OECD country and also considerably larger to that of any other country of the Latin American region. This study aims to elucidate the role that the 2001 labor reform played on these results and the effect this has had on variables associated to Peruvian workers’ well-being. To this end, we exploit the information on contract type and start date (identified by the employment duration), which are reported on the household surveys, to analyze the decision between using fixed-term contracts or indefinite-term contracts. The average impact obtained from a differences-in-differences estimation with matching, having workers with contract but with no health insurance as a control group, is a reduction of 41 percent in the probability of having contracts of indefinite duration in the short term (up to five years after the reform), whereas the long-term impact has been a drop by 70 percent. These results are consistent, and similarly large, as those found in a model of simple differences controlling for workers’ characteristics, firms and economic context. The results are robust to placebo tests and estimations by activity sectors and firm size. These results mean that, due to the reform, by 2015 over 900,000 jobs that could have been of indefinite-term were fixed-term contracts instead. Estimates based on Mincer equations suggest that this meant a loss of around 1.5 billion dollars in workers' labor income in 2015. Also, 36,000 workers would have affiliated to a union, had such reform not been implemented. These figures suggest than, instead of increasing workers’ protection, the reform implemented by the Constitutional Court left a large portion of them unprotected.

Suggested Citation

  • Jaramillo, Miguel, 2019. "The unprotecting effects of employment protection: the impact of the 2001 labor reform in Peru," GLO Discussion Paper Series 299, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:299
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/191047/1/GLO-DP-0299.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Pierre Cahuc & Stéphane Carcillo & Ulf Rinne & Klaus Zimmermann, 2013. "Youth unemployment in old Europe: the polar cases of France and Germany," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-23, December.
    2. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    3. Maurizio, Roxana., 2016. "Formas atípicas de empleo en América Latina : incidencia, características e impactos en la determinación salarial," ILO Working Papers 994907873402676, International Labour Organization.
    4. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
    5. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
    6. Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
    7. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, June.
    8. Nickell, S.J., 1987. "Dynamic models of labour demand," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 9, pages 473-522 Elsevier.
    9. Centeno, Luis & Centeno, Mário & Novo, Álvaro A., 2009. "Evaluating job-search programs for old and young individuals: Heterogeneous impact on unemployment duration," Labour Economics, Elsevier, vol. 16(1), pages 12-25, January.
    10. repec:eee:labchp:v:3:y:1999:i:pb:p:2567-2627 is not listed on IDEAS
    11. Puhani, Patrick A., 2012. "The treatment effect, the cross difference, and the interaction term in nonlinear “difference-in-differences” models," Economics Letters, Elsevier, vol. 115(1), pages 85-87.
    12. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    13. Pedro S. Martins, 2009. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 257-279, April.
    14. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages 214-244, June.
    15. David H. Autor & John J. Donohue & Stewart J. Schwab, 2006. "The Costs of Wrongful-Discharge Laws," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 211-231, May.
    16. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    17. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    employment protection; labor reform; impact evaluation;

    JEL classification:

    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:glodps:299. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - Leibniz Information Centre for Economics). General contact details of provider: http://edirc.repec.org/data/glaboea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.